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Core Concepts of
ACCOUNTING INFORMATION SYSTEMS
Moscove, Simkin & Bagranoff
Developed by:
S. Bhattacharya, Ph.D.
Florida Atlantic University
John Wiley & Sons, Inc.
Chapter 15
Electronic Commerce and
the Internet
• Introduction
• The Internet and the World Wide Web
• XBRL – Financial Reporting on the
Internet
• Electronic Commerce
• Privacy and Security on the Internet
The Internet and
World Wide Web
• The Internet is a collection of hundreds
of thousands of local and wide area
networks that are now connection
together via the Internet backbone.
• An Internet service provider
(ISP) maintains its own Internet
computers.
Internet Addresses and
Software
• To transmit data over the Internet, a computer
uses an Internet address and a forwarding
system.
• The Internet address begins as a domain
address, also called a universal resource locator
(URL).
• Internet computers translate text-based
domain addresses into numeric Internet
protocol (IP) addresses.
Intranets and Extranets
• Intranets are internal company networks
that use the same software as the
Internet.
• Some businesses create Extranets that
enable selected outside users to access
their Intranets.
The World Wide Web
• The graphics portion of the Internet is
called the World Wide Web.
• A Web browser enables users to view the
graphics files of the Internet.
• Web pages are created in an editing
language such as hypertext markup
language (html) or a programming
language such as java.
The World Wide Web
• The Internet transfers Web pages from one
computer to another using a communications
protocol such as hypertext transfer protocol
(http).
• A home page is the first page a user
sees when he or she supplies a
web browser with a domain
address.
• Home pages act as a table of
contents with hyperlinks to other
web pages.
Groupware, Electronic
Conferencing and Blogs
• Electronic mail enables individuals or
companies to communicate with other
Internet users around world.
• Electronic conferencing tools
enable users to teleconference
with one another.
Groupware, Electronic
Conferencing and Blogs
• Newer work group software called groupware
allows users to send and receive email, plus
perform a wide range of other tasks.
• Groupware has also been the technology
behind the knowledge sharing that many
professional service firms use as
competitive advantage.
• Blogs
XBRL – Financial Reporting
on the Internet
• The primary repository of financial
information on the Internet is the Security and
Exchange Commission’s Electronic Data
Gathering and Retrieval Database (EDGAR).
• EDGAR contains the financial report filings of
U.S. publicly held companies in plaintext
format.
• PricewaterhouseCoopers developed EdgarScan
to take the information in EDGAR and
changing it to a common format.
XBRL – Financial Reporting
on the Internet
• EdgarScan’s common format allows users to
extract data from multiple companies and
compare it.
• However, such comparisons are limited to
formal financial report filings for a limited set
of enterprises.
• The eXtensible Business Reporting Language
(XBRL) is a specialized software language for
the financial reporting industry.
XBRL – Financial Reporting
on the Internet
• XBRL is a subset of eXtensible Markup
Language (XML).
• XML is similar to HTML and yet different
because:
– Its tags are extensible
– The tags describe the data rather than just
indicating their display
• XBRL is a global effort by the XBRL Steering
Committee (www.xbrl.org).
XBRL – Financial Reporting
on the Internet
• XBRL’s many benefits include:
– Single-format filing
– Ease of corporate comparisons
How Does XBRL Affect
Accountants?
• Provides greater transparency
• Permits automatic and reliable exchange of financial information
across different formats and technologies
• Does not require a change to existing accounting standards or
disclosure requirements
• Eliminates the need to re-enter financial data for different users
• Lowers the cost of the preparation and distribution of financial
statements
• Improves investor- and analyst- access to information
• Allows accountants to consolidate and scrutinize internal data for
financial reporting purposes
• Allows CEOs and CFOs to deliver more transparent information
Electronic Commerce
• Electronic Commerce (EC) refers to
conducting business with computers and
data communications.
• EC can be performed over the Internet or
using proprietary lines.
• General categories of EC include
retail sales, E-cash,E-wallets, and
electronic data interchange.
Retail Sales
Advantages of Virtual Stores
• Creating Web pages is cheaper than creating
and mailing catalogs.
• Distribution is worldwide.
• Selling takes place around the clock with no
additional staffing requirements.
• Product descriptions, sales prices, and
information on merchandise availability can be
updated immediately.
• Customers create their own sales orders online.
• The sales personnel required for these virtual
stores is minimal.
E-Cash
• With the use of credit cards over the Internet,
identity fraud can be a problem.
• Electronic cash (E-cash) may be a more
desirable payment method.
• The most important advantage of E-cash is the
ability to identify its users.
• E-cash eliminates the need to
transmit credit card numbers
over the Internet.
E-Wallet
• E-wallets are software applications that
store a consumer’s personal information,
including credit card numbers and
shipping addresses.
• The advantage of an E-wallet is
that you do not have to enter
all your personal information
every time you make an
online purchase.
Business-to-Business
E-Commerce
• Most e-commerce is business-to-business (b2b).
• A major part of b2b e-commerce concerns
purchases of supplies and equipment
electronically or electronic procurement.
• Companies may manage their supply chain by
linking e-commerce to internal enterprise
resource planning (ERP) systems.
Electronic Data Interchange
•
•
Electronic Data Interchange (EDI) allows
organizations to transmit standard business
documents over high-speed data
communications channels.
EDI streamlines processes because
1) business partners exchange
documents quickly and easily,
2) there are no postal delays, and
3) EDI eliminates most of the paperwork.
VAN-based EDI versus
Internet-based EDI
• To implement EDI applications, most businesses
currently use private, point-to-point
communication channels called Value-Added
Networks (VANs).
• An alternative to VAN-based EDI is to use the
Internet.
– Advantages of Internet-based EDI are the ability to
use well-understood Internet technology, a preexisting,
costless network to transmit business data, and
convenience.
– Disadvantages of using Internet-based EDI are data
security and lack of consulting expertise in the
implementation phase.
Privacy and Security
on the Internet
• The Internet and WWW have the
advantage of being very accessible.
• Accessibility can also mean
“vulnerability.”
• Email, Webpages, and computer
files can be accessed by
someone posing as an
authorized user.
Privacy and Security
• An Internet presence for companies
introduces unique privacy and security
concerns.
• These concerns call for specialized
controls that limit data and information
access to authorized users.
• Authentication involves verifying that
users are who they say they are.
Firewalls
• A Firewall guards against unauthorized access
to sensitive file information from external
Internet users.
• This is security software that a company
installs on Internet computers and that limits
file accesses to authorized users.
• Firewall software examines packets of incoming
messages using an access control list.
• Firewalls cannot prevent spoofing, or
masquerading as an authorized user.
Proxy Servers
• A Proxy Server is a computer and related
software that creates a transparent gateway to
and from the Internet, and that can be used to
control Web accesses.
• Four advantages of proxy servers:
– Funnel all incoming and outgoing Internet requests
through a single server
– Examine all incoming requests for information and test
them for authenticity
– Limit employee Internet access to approved Web sites
– Limit information to only Internet-related materials
– Ability to store frequently accessed web pages on the
server’s own hard disk.
Data Encryption
• Data Encryption transforms plaintext messages
into unintelligible cyphertext ones using an
encryption key.
• Data encryption standard (DES) is an
encryption scheme used by the U.S.
government.
• A single key is shared by communicating
parties in secret key cryptography.
• Public key encryption requires each party to
use a pair of public/private encryption keys.
Digital Signatures
• A Digital Signature is used to authenticate
business documents transmitted or received
over the Internet.
• In 1994, the Digital Signature
Standard (DSS) was adopted by
the National Institute of Standards
and Technology.
• The presence of the digital signature
authenticates a document.
Digital Certificate
• Another authentication technique is the
digital certificate.
• Digital certificates are verification of
identity provided by an independent
third party called a certificate authority.
• These certificates are signed documents
with sender names and public key
information.
Digital Time Stamping
• Many important documents transmitted
over the Internet are time sensitive.
• Digital Time-Stamping Services (DTSSs)
attach digital time stamps to documents.
• Time stamps enable businesses
to overcome problems of downed
file serves or power failures that
delay transmission.
Copyright
Copyright 2005 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
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the use of the information contained herein.
Chapter 15